California

ICN Awards Chief $33.1 Million

Pharmaceuticals: Bonus for Milan Panic's role in spinoff of Ribapharm draws criticism from dissident shareholders.

Milan Panic, facing a proxy contest next month that may end his 42-year-old reign at ICN Pharmaceuticals Inc., won't be walking away from the drug company without a fight. Or a handsome payoff.

Panic, 72-year-old chairman and chief executive of the Costa Mesa company, was awarded a $33.1-million bonus earlier this month for his role in the recent spinoff of Ribapharm Inc., which makes the hepatitis drug Ribavirin.

ICN officials said Panic did not receive stock in Ribapharm, which began selling shares to the public April 12. ICN's board awarded the cash bonus to Panic along with bonuses totaling about $17 million to 12 other executives and directors, according to a Securities and Exchange Commission filing.

The bonus to Panic, which follows a salary and bonus of about $1.9 million for 2001, was criticized by some observers and shareholders who have complained about Panic's leadership and excesses.

"We think this award was egregious and a blatant transfer of shareholder wealth to executives," said Tim Rankin, assistant portfolio manager at Franklin Mutual Advisers. Franklin and Iridian Asset Management, which combined hold more than 10% of ICN shares, are pressing to secure three board seats at ICN's annual meeting set for May 29. That would give nonmanagement directors control of the board.

Panic was unavailable for comment. Alan Charles, ICN's executive vice president of corporate relations, defended the bonus, saying it was a reward for Panic's key role in the development of the spinoff.

Charles said the bonuses were in lieu of stock or options in the new company and that the amount--which was determined after consultation with compensation specialist Towers Perrin--was not out of line with the practices of corporate America. He noted that ICN's board, including three dissidents who were voted in last year, unanimously approved the bonuses.

But some compensation specialists questioned the amount and the validity of the large one-time bonus. "The act of splitting off a company into two pieces is not an act worthy of a bonus at all," said Graef Crystal, a compensation expert in Las Vegas and a onetime executive at Towers Perrin.

Ribapharm, which went public at an initial $10 share price, closed at $9.93 Monday, off 32 cents on the New York Stock Exchange.

ICN, a company that Panic founded in 1960, earned $85 million on sales of $858 million last year. Its stock was down 54 cents Monday, at $27.05 on the NYSE.

Analysts said the bonus payments probably won't have a material effect on ICN's balance sheet. ICN has about $700 million in cash, spokesman Charles said.

Nonetheless, the bonus is almost certain to draw fire from dissidents as two sides gird for another tough campaign to win shareholder votes. Last year, when another group of dissidents sought Panic's removal, ICN management and its opponents launched an expensive and bitter public campaign.

Panic has suggested he is willing to step down from his executive posts if the board adopts a succession plan that he has been involved with drafting. "He's getting tired of the bricks flying," Charles said.